Florida's Avatar Property enters receivership
The insurance company, which has more than 32,000 policyholders, has been ordered to liquidate.
Coming in the wake of St. Johns Insurance Company’s insolvency in Florida, Avatar Property & Casualty, which has just over 32,000 policyholders, has been ordered into receivership for the purpose of liquidation by a Florida court. The Florida Department of Financial Services (FDFS) is the court-appointed receiver, according to state documents.
Avatar agreed to the order and the findings that the company is insolvent. The company wrote only in Florida and 85% of its business is homeowners multi-peril with the rest fire and commercial coverage, per AM Best.
This time the FDFS does not have an insurer lined up to take the Avatar policyholders. When the insurtech Slide took over the nearly 146,000 St. Johns’ policies, there was outcry from other insurers in the state. Insurers were upset that they did not have the opportunity to bid on the St. Johns book of business, and were upset at the transfer of over $90 million in unearned premiums to Slide. Instead, the Department has indicated that they will allow agents from other insurers to solicit and rewrite the Avatar policies, otherwise, policyholders will have to seek coverage themselves with other private insurers or from Citizens Property & Casualty Insurance Corporation, the insurer of last resort in the state.
While other insurers are crying foul over the St. Johns situation, the unearned premium is transferred to Slide would have been paid out to the St. Johns policyholders by the Florida Insurance Guaranty Association (FIGA), and the insureds would have had their policies canceled 30 days post-liquidation had the transfer to Slide not been approved by the court. This benefits the policyholders as the liquidator is responsible for the calculation of the unearned premium amounts, and then forwards them to FIGA who would pay the insureds. This can take weeks or months after the insolvency date. By having the policies transferred to another insurer the policyholders have no break in coverage and do not have to pay a new premium (unless an installment payment is regularly scheduled) to a new insurance company.
The 146,000 St. Johns policyholders would have been scrambling to secure other coverage in a state with few options for most insureds, and many would have turned to Citizens, which has taken on a large number of policies over the past year due to the property insurance crisis in the state and previous insolvencies. In addition, the transition of the St. Johns policies effective shortly after the February 25, 2022 liquidation date decreases the number of potential claims FIGA would have to cover, as Slide is responsible for all St. Johns claims incurred from March 1, 2022 forward. Both of these actions in addition to any reinsurance and other estate recoveries help to decrease the amount of the FIGA assessments for member insurers in the St. Johns insolvency.
The Florida property insurance market is in full crisis mode, and the Avatar insolvency coming right on the heels of the St. Johns insolvency is further evidence of it.
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